RATING DRIVERS
Supporting Factors:
- Strong market position supported by a well-established brand and long history in the Jamaican food trading industry
- Robust corporate governance structure and risk management practices
- Integrated operations in the Food Trading Division enables value chain maximisation and increased operational efficiencies
- History of good financial performance characterized by consistent revenue growth and profitability as well as adequate debt protection metrics
Constraining Factors:
- Significant sovereign risk exposure in Jamaica alongside uncertainties in the global economic environment are likely to present key downside risks to the operations and profitability of GKL
Rating Sensitivity Factors
Factors that can lead to an improvement in the ratings /outlook:
- An improvement in CariCRIS’ sovereign credit risk rating of Jamaica
Factors that can lead to a lowering of the Ratings/Outlook:
- Decline in DSCR ratio to <1.33 times
- Increase in Debt to EBITDA ratio to >4.0 times
- A lowering of CariCRIS’ sovereign credit risk rating of Jamaica
COMPANY BACKGROUND
GraceKennedy Limited (GKL or the Group) is a Food and Financial Services conglomerate that was incorporated in 1922 and is domiciled in Jamaica. The Group, which is listed on the Stock Exchanges of Jamaica and Trinidad and Tobago (T&T), was originally founded by Dr. John J. Grace[1] and Mr. Fred William Kennedy who acquired the shares of the wholly Jamaican subsidiary, Grace Limited, of W.R. Grace and Company[2]. W. R. Grace and Company is a Chemical Conglomerate based in the United States of America (U.S.A.) that for much of its early history was involved in maritime shipping, mining, and agriculture in South America. W. R. Grace & Company divested its operations in Jamaica during the latter part of the global economic depression of 1920 – 1921. GraceKennedy and Company Limited was formed on February 14, 1922, and initially operated as a small trading establishment that eventually expanded to include mercantile, commercial and other related businesses.
Over the ensuing years, the Group’s focus has been on regional and international expansion as well as diversification of its business lines through mergers and acquisitions, the development of strategic partnerships and organic growth. GKL’s operations have now expanded to include 46 subsidiaries, 6 associated companies and 2 joint ventures with operations in over 40 countries that include Jamaica, the U.S.A., the United Kingdom (U.K), Canada and several other Caribbean, African and European countries (Chart A). The Group’s total assets stood at J $167.3 billion[3] as at December 2020 and its total operating revenue for the year ended was J $115.4 billion, with approximately 53.4% of total operating revenue being derived from Jamaica.
The Group is organized into two (2) divisions, GK Foods, and GK Financial Group, with the revenue from GK Foods representing around 79% of total revenue annually. GK Foods’ principal activities include (i) the merchandising of general goods and food products, both locally and internationally; (ii) manufacturing/processing of food products through GKL owned factories and external suppliers; (iii) the distribution of Grace, Grace-owned and third-party brands in Jamaica and internationally; (iv) the operation of retail outlets through the Hi-Lo Supermarket chain in Jamaica.
[1] Dr. Grace, a member of the family that founded the predecessor company, W. R. Grace and Company Ltd, worked at the predecessor company Grace Limited – www.wikipedia.com.
[2] W. R. Grace and Company Ltd was founded in Peru in 1854 by Mr. William Russell Grace, an Irish immigrant who settled in South America with his family – www.wikipedia.com.
[3] Total assets have been adjusted to exclude intangible assets, unrealized gains/(losses) and contingencies.
Analytical Contacts:
André Joseph
Tel: 1-868-627-8879 Ext. 224
Mobile: 1-868-788-4693
E-mail: ajoseph@caricris.com
Anelia Oudit
Tel: 1-868-627-8879 Ext. 226
Mobile: 1-868-487-8364
E-mail: aoudit@caricris.com
Website: www.caricris.com
Email: info@caricris.com
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